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Sound production for games is not that much different from film or animation. While the game isn't chronological (which poses a bigger challenge to music composers) the sound effects are usually short and played at certain events.

In most of the cases, you don't want to record your sounds outside. A studio environment is preferable where you can align your recording devices perfectly and where you're sure there won't be any background noise. A lot of sounds in films and games are actually faked (mimicked) and not recordings of the "real" object. This is usually done by a Foley artist.

Usually it's cheaper to buy existing sound-effects, as recording your own with decent quality requires good equipment and experience. Creating your own sound-effects can make your game stand out, so if you feel comfortable doing so, go ahead!

As for the different "states" of a sound-effect (eg. echo, etc.): I'd say it depends on your target-platform and the type of game. It's always cheaper (in terms of processing power) to have your assets ready without the need for further processing.

If your game runs on a mobile device, then there's a high probability that you can't do much realtime sound processing. Things look different on a modern desktop PC though. But it also highly depends on the type of game and the use of sound-effects within. If you have very dynamic effects that sound differently in almost every scene, then it's probably better to try to calculate the effects in real-time or pre-process them at loading of the level. But if your game isn't revolving around the sound-effects (eg. sound-effects are an important part of gameplay), most people won't notice the nuances in the sound and you can boil it down to 1-2 pre-fabricated assets.

Too bad I can only vote this answer up once =) As I've understood it, for most movies made today, nearly 100% of the audio is re-created after the fact, sometimes even including all voice acting.
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Jari KomppaDec 7 '11 at 8:49

most people won't notice the nuances, unless the nuances are on every step they make..
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joltmodeDec 7 '11 at 8:52

@Tom that has to be proven (eg. tested). If the sound-effects aren't an integral part of game-play (eg. people need to pay attention to sound), people won't notice slight variation in effects.
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bummzackDec 7 '11 at 8:54

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I'd say that still depends. Repetition can become painfully obvious, and it will bother some people more than others. Only 1-2 assets for a repeated effect seems pretty spartan to me, especially for footsteps, even on a single material.
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michael.bartnettDec 7 '11 at 10:48